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MGT583 Managing for Sustainability Assignment
Sustainable Development is to maintain present resources without compromising the ability to meet the standards that can be used for the future generations and the environment. The term itself possess principles to achieve sustainable development starting from intergenerational equity to intra-generational equity while maintaining ecological integrity with the stakeholders and wider community (Tietenberg & Lewis, 2016). Sustainable business development in mining sector highlights the different activities like extracting, producing, transporting, disposal, reusing and recycling of mineral and metal products in the most viable, efficient and environmentally responsible manner (Gorman & Dzombak, 2018). The best practices are been used to consider the values in government and corporate decision making, enhancing the quality of life and further participation and involvement of stakeholders towards their safety and guidance on decision making (Epstein, 2018).
Australian Mining Sector and Sustainable Development
When the focus spurs on Australia’s mining sector, the companies have not only responded to the environmental movement but has even improved the mine site containment and reintegration against undesirable discharges. However, due to certain changes in divestments of non-core assets have increased the sustainability risk related to portfolio, regulation and mine life cycle (de los Reyes, 2017). The detriment of sustainability is also because of small mining firms are less focused than the big mining houses (Owen & Kemp, 2015).
On the contrary, in earlier days the sustainability and operative efficiency were viewed as different subjects but since, sustainability can bring down progressive governments for their remote link with operational performance; mining executives have changed their view and understood that it can be worked on both short and long term benefits (Bice, 2014). Leading mine owners have been developing plans on protecting the environment with interest of the people while focusing on mine’s life cycle (Corder, 2017). Basically, to focus on three aspects of sustainability issues – economic, social and environmental
Figure 1: Three aspects of Sustainability
Source: (atkearney.com.au., 2016)
The significance of choosing mining sector is because contribution to Gross Domestic Product (GDP) has been 8.5% in 2015 and contributes to 2% of the workforce as it is majorly a capital intensive sector. Also, because of low population density area, Australia has an advantage in geological endowment with mineral resources making it favourable for long term sustainability.
Significance of choosing BHP Billiton
In mining sector, company like BHP Billiton can help in analysing the sustainability on its 3 aspects. This company is world wide known for its diversified natural resources whether its in the sector of oil or gas or major commodities like iron ore, energy coal, aluminium, copper and so on (bhp.com, 208). Nevertheless, being significant in the field of energy of being an exporter, producer or the consumer, the company aims to reduce carbon emission rate with waster usage, and wishes to commit to communities with the principle of health and safety and in an environmentally viable manner but still cannot overlook the risk in climate change (unglobalcompact.org.au., 2016)
Integration of environmental and economic activity with social concerns is one of the grave issues. The main area of BHP Billiton’s issue is with the environmental juncture where the issue is related to “great acceleration” with “weak sustainability” such as natural capital can be substituted for human capital where prevalence of risk and uncertainty makes it a persuasive case such as employment and cheap energy can be outweighed by environmental concerns (Tost et al., 2018). On the other hand, with weak sustainability, climatic issue as carbon di oxide and global emissions are still rising and are at levels that were not seen in last 800,000 years (IPCC, 2013).
Economically, BHP has been showing an upward trend in terms of revenue streams, asset wealth, long terms economic investments, taxation and employment. On a whole, there has been dispersion earned in terms of communities with approved investments and employment in long run in relation to expanding business activity (Lodhia & Martin, 2014). On the supply side of the market, BHP may face issue, role in oil and gas and copper market might face high costs in the exploration process leading to more costly supply, high taxation regimes as per different countries, long run in gap of demand with anomaly of not reaching its peak in investment with offshore capacities would be hitting the offshore capacity (Balhuizen, 2018).
Further to this, tax regimes is even linked to the investment nature as range of different factors comply to the scenario and all necessary obligation to provide returns to stakeholders (Mackenzie, 2015). The transparency disclosure can be one issue that needs to be complied with costly supply, employment opportunities to maintain its longer-term business investment for economic growth (Hargreaves, 2015).
Socially, the company has been building communities across the countries but with growing number of expansion in business activities, there has been need for a constructive process at different levels of stakeholders (Balhuizen, 2018). Nonetheless, the majority of the company’s assets are near traditional areas and with new building communities, it is becoming difficult for the company to take actions for improved quality of life. Moreover, as per BHP Sustainability Report (2017), there are two ongoing cases related to human rights grievance that needs to be solved and the company is committed towards its resolution.
On an environment upfront, BHP faces a strategic risk in regards to climate change. Ian Dunlop, an environment activist who has been voted out for the “single director” in the environment concerns and argues corporate and institutional complacency due to immediate danger of climate change (The Conversation, 2013). However, BHP has mentioned that social and environment performance is critical to their sustainability standards and commitments. Also, with continuous investment in fossil fuels and neglecting renewable energy is considered as board level governance issue.
As per the records of ITK summary of company settlements, the BHP has reduced the carbon emissions by 21% in 2006 but there has been concerns on fossil fuels, physical impacts of climate change and their response to it (Leitch, 2017). However, as per the summary of those reports, climate change can not only impact the industry as well as the company both non physically and physically but with rise in renewable energy the carbon footprint needs to be reduced with limiting the fossil fuels.
Policies Undertaken by the Company
BHP Billiton has tried to maintain its “transparency journey” and build its trust in regards to taxes and disclosures made for payments to government by being a member of “Extractive Industries Transparency Initiative” (EITI) since 2002 (Adhariani, Sciulli & Clift, 2017). Through, infographic its transparency can be given as
Figure 2: Transparency Journey of BHP
Source: (Mackenzie, 2015)
In 2014, company was ranked as fourth in all for being transparent in the world. It even has been holding programs, key financial report information for the investments to be made with certain company holdings. Through, this, it is able to increase its economic growth from the range of 3.5% to 3.75% in year 2018 (Mackenzie, 2015). Closure planning has even helped in life cycle and decision making for the stakeholders to make investments and resource planning through risk and exposure of operational design. Also, it supports its use, recycle and reuse through value chain with the help of International Council of Mining and Metals’ Sustainable Development Framework (Moran, et al., 2014).
The local NGO on the social upfront has supported RIAA in 2009 to depict the showed ethical investment in categories of 3 and 5 which has perceived creation of employment opportunities and affecting economic revenue with lower pollution (Lodhia & Martin, 2014). In addition to this, the year on year injury fatalities have been reduced by making a 2% improvement. Union N°1 collective agreement to solve labour dispute cases (Mackenzie, 2015). Programs like Anti-corruption and other programs like Field Leadership Programs such as layered audit and critical control observation (Lodhia & Martin, 2014). In establishing communities and settling human rights grievances, the investments will help in improving quality of life for the people living and investment will not be made less than 1% of pre-tax profit on a basis of three year average (BHP Sustainability Report, 2017). This will be followed by Regional Indigenous Peoples Plan for all geographically relevant assets by June 2022.
Environmentally, on climate issues the company has achieved more than annualised abatement in 2017 and further wishes to reduce greenhouse emissions below the existing level. The same can be shown using infographic as a yearly appraisal.
Figure 3: Greenhouse Gas Emissions
Source: (BHP Sustainability Report, 2017)
Yet, when compared to global commitments, the policy of net zero needs to be operational till second half of the century for GHG emissions. Global Operating Model also initiates carbon capture and storage (CCS) machineries to lessen elusive emissions the assets of coal and petroleum assets. On the other hand, Kasigau Corridor Project in Kenya, REDD+ commitment and also with investment in Conservation International and Baker & McKenzie have been helping in cost effective solution to climate change. The voluntary submission of CDP has been done since 2013 to track the voluntary disclosures related to climate. The integration of renewable energy into CCS operations will help in giving a mix system of lower cost, reliability and reduction in carbon emissions (Budinis, et al., 2018).
Out of the three aspects of sustainability, environmental issues holds of utmost important for BHP Billiton. The company has been trying to reduce the carbon emission rate but with continuous expansion in business activity across different regions are resulting in lack of independent assurance with reporting to a path of sustainable development (Fonseca, McAllister & Fitzpatrick, 2014). The CCS path derived by the company needs to work in the environment before making strong policy and recommendations for issues related to fossil fuels and renewable sources.
When analysed on socio-economic platform, only one area, that still had not been met is the zero-work related fatalities over the time. The changes have not been significant to make a astonishing difference. However, the target is still needs to be carried out annually for better practices. There is lack and linking of socio-effectiveness criteria, with practical scrutiny and further research. Moreover, there is refinement needed in environmental drivers of social sustainability.
The way to sustainability made by BHP Billiton is expressive in the past decade. The company has lifted its profit, increased the land footprint through expansion and on the same scale is environmental intensity has even fallen. This can be contemplated in though, BHP has been allowing an investment but has been hampering the cost benefit equation which needs to be maintained for the productivity and growth agendas in long run.
Secondly, there is no benchmark when it comes to environment action and activity and is mostly produced in generic form. Even though the strategy like CSS is mentioned but there has been lack of proper steps and guideline to achieve those strategies. A clean guide needs to be represented and the company even needs to be sure of the strategies undertaken.
On socio-economic platform, practices needs to be made where there are not only suitable trade offs between indigenous or legislative framework but socially principled, financially sustainable and ethically sound decisions could be made.
To conclude, BHP Billiton in the mining sector has not only improving its efforts but also striving for a sustainable environment. Being a mineral based company, its main objective lies in making considerable changes while promoting small benchmarks to achieve the ultimate goal of sustainable development. On social and economic area, continuous collaboration of investments, expansion with building communities can yield effective results. There have been cost benefit decisions that needs to cover the three aspects of sustainability. Also, it continuous risk to fall behind societal expectations on climate change needs to have proactive thinking with “strong sustainability.” Hence, BHP Billiton has come a long way forward in maintaining its sustainable goals in the last decade and with Vision of 2022 its aims to meet its target as defined in its sustainability report.
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